As the Department of Health Policy & Management at the Harvard School of Public Health explains it:

We make decisions everyday, usually without much thought about how we make them. An intuitive, personal approach works fairly well when we’re deciding whether we’re going to have eggs or cereal for breakfast, but we may very well overlook important considerations and possibilities when it comes to more complex decisions.

Cost-effectiveness analysis is an analytic method which evaluates procedures of interest via the incremental cost-effectiveness ratio.  In this ratio, changes in resource use (“costs”) compared to a relevant alternative are summed in the numerator, while changes in health effects, compared to the same alternative, are summed in the denominator.  The resulting incremental cost-effectiveness ratios indicate the cost of each additional health effect that one might wish to “purchase” by investing in a more expensive, but more effective, intervention.  Strategies with lower incremental cost-effectiveness ratios are considered more “cost-effective” than strategies with higher ratios.